What are the risks and benefits of buying a house with a friend or sibling?

Two friends hug outside a house they've just purchased.

Half of first-time buyers are now willing to consider “non-traditional routes” to be able to afford a home.

It’s no secret that it’s a challenging time for first-time buyers to get onto the housing ladder. Buying a property can be a daunting financial prospect, especially if they’re trying to do it on their own. To help share some of the financial load, buying with friends or family members is becoming an increasingly attractive option for many first-time buyers, opening up more possibilities in terms of both property type and location that might be unavailable if they were to buy on their own.

While there are a number of schemes available to help buyers with their first property (such as the First Homes scheme and Mortgage Guarantee scheme), research by Lloyds Bank has found that half (51%) of young first-time buyers are willing to consider more “non-traditional routes” to be able to afford a home.

So while 62% of under-35s would still prefer to purchase their first property with a partner, 46% are now considering buying with a friend or sibling. Research by Halifax earlier this year found that joint first-time buyers account for 63% of mortgage completions.

Why are we seeing more first-time buyers buying with friends or siblings?

Fundamentally, the reason that so many first-time buyers are teaming up to buy together is down to affordability. Given high house prices and mortgage rates, buying a house on a single income can be challenging. Many prospective buyers can’t get on the ladder on their own, or aren’t prepared to buy the type of house or in a location that they would have to if they were buying alone. However, more young buyers (32% of 18 to 34-year-olds) now say that they don’t care how they get onto the property ladder, as long as they get on it.

Affordability is not helped by the chasm of the affordability ratio. At its peak in June 2022, the cost of a typical UK home was £293,586, while the average annual earnings of a full-time worker were £40,196. This put the house price to income ratio at 7.3, the highest (or least affordable) level ever recorded.

In 2023 the average house price had fallen to £286,276. Coupled with strong wage growth (around +7%), as annual earnings reached £43,090, the house price to income ratio fell to 6.7. While the ratio has been steadily decreasing since 2020, we’re yet to see it fall back to pre-Covid-19 levels, where the ratio was at 6.2.

Is it a good idea to buy a house with a friend or sibling?

Some people are understandably wary of the idea of buying with someone who isn’t their partner, but the most common reason for first-time buyers to consider purchasing with a friend or sibling is to make it more affordable (60%) and because they trust the person (56%).

However, we are seeing some first-time buyers looking at a sibling or friend arrangement as a last resort, with 14% thinking they would have no other way to buy.

There are some factors that first-time buyers looking to go in with a friend or sibling should keep in mind before they take the plunge. This solution doesn’t come without some difficulties and hazards – legal, financial, practical and emotional. Many people in the UK find financial discussions difficult, especially among friends and family, but they are crucial if the arrangement is going to work for both parties.

“Some first-time buyers are looking at sibling or friend arrangements as a last resort, with 14% thinking they would have no other way to buy.”

Psychologist and relationship expert Jo Hemmings outlined some of the key issues that first-time buyers should consider before teaming up on a property together:

Honest and candid communication

When considering buying a property with a friend or family member, the relationship will inevitably change. Before so much as opening a property app for ‘just a look’, potential buyers should discuss their finances and future plans. Discussing the practical side of owning a property from the start helps to maintain communication and trust. Practical issues can include anything from being a cat or dog person, playing a musical instrument to how often someone washes the dishes.

Sibling issues

Buying a home with a sibling may be the perfect answer to getting on the property ladder for some, but buyers should be aware that it can cause issues in the wider family dynamic. Resentment, favouritism or rivalry may be a concern. Siblings should have open discussions between themselves and family members so that they can air and resolve any potential issues in advance.

Other friends or family

There may be some doubts expressed by other friends, or there may be resentment that they weren’t asked to go in on the property purchase. The buyers should be as clear and as gentle as possible as to why they’ve made the decision to buy with someone else, and to remember that everyone’s circumstances are different. They shouldn’t feel guilty about taking their first steps onto the property ladder.

Investment disparity

Often there can be a disparity in the amount of money each of the buying parties is able to save for a deposit, or equally a difference in the proportion of the monthly mortgage each is able to pay. Drawing up a legal agreement regarding co-ownership is essential to cover each owner’s percentage of equity in the property. While this might feel like ‘overkill’ between friends or family, a formal document will give the buyers clarity and help to avoid any misunderstandings (and fallings out!) further down the line.

Property decisions

Not every property is right for everyone’s needs, so buyers should begin by discussing the type of property they want. A good starting point for this would be whether it’s a flat or house, leasehold or freehold, where it might be located and how long each party plans on living there.

Also, buyers should keep in mind that there are costs involved in managing and maintaining homes, such as service charges if it’s a flat. These should be joint decisions, but it’s important that the buyers outline who is ultimately responsible for any aspects of this or whether everything will be decided jointly.

Understanding conflict

Sometimes enthusiasm and excitement at buying a property together can mask potential disagreements that may arise later. Even if each buyer has jointly decided that they want a property with a garden or to invest in a new kitchen, disagreements over major or minor issues will inevitably happen. The buyers should decide how they’re going to resolve any potential conflict before it arises, and most importantly raise these issues with the purchasing partner when they do.

A fun way to try and understand these is the “newlywed” game, where you give the answer to a question you expect the other person would give, to see how well the buyers know each other - and find out where they might know less that they think about the other person.

Lifestyle changes

When buying a property, it is important to consider that circumstances can change. This includes everything from a new partner to a job change or relocation, which can all impact on the original plan. To mitigate any issues down the line it is wise to draw up an exit strategy agreement should one of the buyers want to sell or move out before the other.

Seek out advice

Buyers should speak to anyone who has experience in this area to help with the decision. This includes the bank, which can offer mortgage advice, friends or family who have been through the same experience or a boss regarding career potential. This can help buyers to foresee issues they might have missed.

Do we expect this first-time buyer trend to continue?

In short – yes. While mortgage rates are beginning to settle, home owners will need to get used to them being around 3.5-4.5%. And though wages are steadily increasing, so are house prices, which means that affordability continues to be one of the biggest challenges that first-time buyers will face. However, first-time buyers have an increasing number of ways to get onto the ladder to realise their ambitions of home ownership.

About the author Amanda Bryden

Head of Halifax Intermediaries and Scottish Widows Bank, Lloyds Banking Group

Amanda joined Lloyds Banking Group 2 years ago as head of Halifax Intermediaries and Scottish Widows Bank. Nurturing relationships with mortgage brokers across the UK, the Halifax Intermediary team deliver over 85% of the banks mortgage business and help turn home ownership dreams into a reality.

Amanda has enjoyed a successful career in the mortgage industry that spans more than 26 years. Her career in the sector started as a mortgage broker and she has gone on to enjoy a variety of senior roles across 3 of the top 6 mortgage lenders. Amandas experience brings the insight to support mortgage brokers in delivering excellent customer outcomes, and the depth of knowledge to ensure the partnerships between lenders and brokers can continue to be meaningful and mutually beneficial.

Outside of work Amanda can occasionally be seen ruining a good walk by trying to play golf with her husband Fraser. Between them they have three sassy teenager daughters and the family favourite, their Maltipoo dog Bailey. Amanda is a self-confessed terrible cook but is very happy to sample others cooking.

Follow Amanda on LinkedIn.

Amanda's background

About the author Jo Hemmings

Behavioural and Media Psychologist, Dating and Relationship Coach, Author, TV and Radio Broadcaster and Public Speaker

Jo Hemmings is a Behavioural Psychologist and a Registered Member of the British Psychological Society (BPS) She is also an Accredited and Organisational Coach with the Association of Coaching (AOC). She specialises in media and news analysis as well as a being a dating and relationship coach and TV and radio personality.

With a degree from the University of Warwick and further training at the University of London, Jo is the UK’s best known and respected Behavioural Psychologists and was the UK’s first Dating Coach. She runs a private counselling and coaching practice in London.

Jo is the Consultant Psychologist on ITV’s Good Morning Britain and Tonight as well as Talk TV. She regularly appears on the BBC, ITV, Channel 4, Channel 5, GB News and Sky News as well as a number of documentaries. Recent TV shows include C4’s Married at First Sight and 90 Day Fiancé.

Jo is the author of several successful books on psychology and relationships, writes regularly for magazines such as Marie Claire, Grazia and Fabulous. She is the resident Psychologist and Relationship Expert for Platinum Magazine. Jo’s latest book How Psychology Works (Dorling Kindersley 2018) was published to international acclaim.

She regularly comments and contributes to articles for most of the national press, including The Guardian, The Sunday Mirror, The Daily Mail, The Times, The Telegraph and The Sun as a psychologist.

www.johemmings.co.uk

Jo's background

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